Euroclear UK & Ireland Investment funds service docx

Euroclear UK & Ireland
Investment funds service
The UK’s fi rst automated funds processing solution

Euroclear UK & Ireland investment funds service
Euroclear – March 2011 1
Euroclear UK & Ireland investment funds service
Combining the strengths of the CREST settlement system and the EMX
Message System to automate the funds industry
The problems of processing fund transactions are well known. Processes are often
manual, costs are unacceptably high, and the date of settlement is often unclear.
This lack of standardisation is restricting potential growth in trading volumes.
Euroclear UK & Ireland is addressing these time-consuming, ineffi cient and
unnecessarily expensive processes. Developed in partnership with 65 industry
professionals from 39 funds organisations, our investment funds service provides
a single point of input and full automation for the funds industry.
Bringing automation to manual processing
The Euroclear UK & Ireland investment funds service is the fi rst integrated,
electronic order routing and settlement infrastructure for UK fund transactions. The
solution:
• provides settlement within our CREST system on T+4
1
basis, helping you to
better realise your cash management potential
• allows you and your clients to monitor fund positions as they settle throughout
the day and reconcile in real time. You can also handle any exceptions via the
CREST system as they occur
• enables paperless transfers within the CREST system and automates corporate
action processes
For the fi rst time players can benefi t from the same proven effi ciency and
reliability of systems used for other security types administered in the UK and

Ireland. This allows you to take advantage of the equivalent economies of scale
this provides.
1
Transfer of legal title takes place outside of Euroclear UK & Ireland’s CREST system, when the
legal register is updated.
“Euroclear UK &
Ireland funds settlement
is ushering the industry
into a more cohesive,
rationalised and cost-
effi cient era.”
Andrew Butcher,
COO at Charles Stanley
Euroclear UK & Ireland investment funds service
2 Euroclear – March 2011
How the service works
1. Subscriptions/redemptions
1. A retail client places an order with his IFA to subscribe to or redeem units
in a fund.
2. The distributor routes the order either to the EMX Message System or
via other methods to the fund manager.
3. The EMX Message System automatically routes the order to the fund manager
(product provider). The fund manager completes the order by sending an
electronic contract note to the distributor.
4. Settlement instructions are sent to the CREST system, either bilaterally or
automatically via the EMX Message System direct input option.
5. Euroclear UK & Ireland processes the instructions (both the cash and unit
aspects) and electronically confi rms the details of the matched transaction with
the fund manager and the distributor.
6. On Intended Settlement Date (ISD), Euroclear UK & Ireland debits and credits

the distributor’s and fund manager’s securities and cash accounts. It reports the
settled transaction to the fund manager and the distributor. The distributor then
informs the retail client. The movement of securities in the CREST system is
made simultaneously against the movement of cash on the books at the
settlement banks.
“A major step forward
in process automation
and the mitigation of
operational and
credit risk.”
Peter Fleming,
Head of Investment
Administration at Skandia
CREST
settlement
system
Product provider/
third-party
administrator
EMX
Message System
Platform/
Distributor
Settlement
instructions
electronic
contract note
order
Settlement instruction
Reconciliation

Corporate action processing
order
Optional
direct
input
order
Settlement instruction
Reconciliation
IFA
Retail
client
Euroclear UK & Ireland investment funds service
Euroclear – March 2011 3
7. A Register Update Request (RUR) is sent to the fund manager. Registrars and
fund managers are allowed a two-hour period for RUR acceptance.
8. Transaction status reports, open and settled balances and open and settled
transaction reports are available in real time via the CREST system. This allows
distributors to plan present and future cash requirements and to handle any
exceptions.
2. Reconciliations/account holdings
The accounts held in the CREST system refl ect the balances held by the fund
manager. Distributors’ holdings are held in member accounts which are reconciled
nightly with fund managers.
At any time during the operational day, real time balances of your entire holdings
are available. Regulatory distributor asset reconciliation obligations, as laid down
by the FSA, can be fulfi lled by using the balances held within the CREST system.
CREST system
Member account
25,000
6,500 6,500

8,500
4,000
19,0005,000
Member account Member account
BAC
M&G BNY BNY BNYCAZ CAZM&G
25,000 5,000
6,500 8,500 4,0006,500 19,000
Member accounts
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UÊ,iviVÌi`ÊÊÌiÊÀi}ÃÌiÀ
,-/ÊiLiÀÊ*>ÀÌV«>Ì®
Member
PART ID: 00123
M&G
BNY
CAZ
A
B
A
B
B
C
C
Euroclear UK & Ireland investment funds service
4 Euroclear – March 2011
3. Corporate actions
• Income distributions will be credited to your CREST member account
2
.

Fund managers can credit securities and cash distributions directly to the
distributor’s member accounts. Distributors and fund managers can monitor
their distributions via the CREST system.
• Securities movements made as a result of fund mergers and wind-ups are
applied to distributors’ accounts on the merger date of the event.
4. Transfers
• Unit movements between CREST member accounts as the
result of re-registrations are performed by matching distributor instructions.
Fund manager registrar updates are acknowledged as with subscriptions and
redemptions.
• Switches and conversions are actioned on CREST member
accounts as the result of fund manager or matched distributor instructions.
2
All securities in the CREST system are held in member accounts within a Euroclear UK & Ireland
membership.
Euroclear UK & Ireland investment funds service
Euroclear – March 2011 5
Benefits for distributors
• Reduced risk and errors – our STP service automates funds processing from
order routing through to settlement. No manual intervention is required.
• Settlement within 4 business days – compared with up to 10 business days
today. There is also a much greater chance of settlement on ISD because we
can match instructions from the fund manager and distributor from or after
order confi rmation.
• Get a real-time view on your funds holdings – benefi t from up-to-date fund
balances based on processed transactions at Euroclear UK & Ireland which are
reconciled with the fund register on a daily basis. This reduces your operational
risk and helps you to provide your clients with improved accounting services.
• Manage your cash fl ow more easily and reduce funding costs – our solution
credits payment into your CREST account on ISD. Cash settlement is also

likely to happen earlier on ISD, because our system processes most settlements
between 06:00 and 08:00. In addition, our reports make it easier to forecast
your future cash requirements and meet your funding obligations.
• Uses existing functionality – you can continue to use the same formats and
mechanisms you use for the EMX Message System and other Euroclear UK &
Ireland asset class business. An ISO interface can also be used for transaction
input, reconciliation and corporate action processing. This allows you to expand
your funds business with minimal development costs.
• Increased back-offi ce effi ciency – automation means that delays associated
with faxing and mailing documentation are eliminated. Information can be
accessed quickly and easily, resulting in an immediate and substantial reduction
in manual workload and its associated costs. Real-time reporting also lowers the
number of processing-related queries.
• True exception processing of unmatched transactions and reconciliation
failures – increases effi ciency and signifi cantly reduces administrative
workload. Fewer exceptions should be experienced due to settlement matching
and resource management.
• Transparency of order fl ow and settlement process with full audit trail –
you can keep a full transaction history and record of activity, allowing you to
recall transactions and balances quickly and easily.
“Euroclear UK &
Ireland funds settlement
means that we will be
able to settle our trades
in a standard four-day
period, only one day
more than for equities.
It’s a guarantee for us.
Everyone knows when
they will be paid and we

won’t have any problems
with cheques getting
lost in the post.”
Shirley Mansour,
Head of IT and Settlements at
Cardale Asset Management Limited
Euroclear UK & Ireland investment funds service
6 Euroclear – March 2011
• Paperless transfers – once funds are held in the CREST system, paperless
transfers can take place via the matching of free of payment instructions. Fund
providers are able to acknowledge the transfer and update the register within
two hours of settlement.
• A range of corporate action services – reducing processing time and
increasing effi ciency (see page 4 for more details).
Benefits for product providers/third party
administrators
• Improved inventory management – our reports allow you to forecast your
future cash requirements and meet your obligations. Cash settlement on ISD is
likely to happen between 06:00 and 08:00, enabling you to receive cash earlier
in the day.
• Fully automated cash settlement of funds subscriptions and redemptions
– allows you to automatically provide the settlement and reconciliation of your
fund holdings across a large distributor base.
• Reduce your manual workload – STP allows you to automate the settlement
and reconciliation aspect of your operations. This will supersede fax, phone and
other manual methods of reporting settlement status to your clients.
• Complete scalability – increased order volumes do not mean increased
settlement costs.
• Improved settlement effi ciency – by matching the orders provided by both
distributor and product provider ahead of settlement date, settlement problems

and failures are easier to handle and less likely to occur. Transparent exceptions
handling also allows you to handle fails more effi ciently.
• Dramatic reduction in counterparty risk – Any cash movements made
across the cash memorandum accounts within Euroclear UK & Ireland are
simultaneously moved in the Bank of England between the accounts of the
settlement banks involved. Finality of cash settlement is therefore achieved
on settlement of the transaction in Euroclear UK & Ireland.
• Paperless transfers – once funds are held in our system, paperless transfers
can take place via the matching of free of payment deliveries. Fund providers
are able to acknowledge the transfer and update the register within two hours
of settlement.
Euroclear UK & Ireland investment funds service
Euroclear – March 2011 7
Tariff
Funds settlement is charged on a transactional basis only, so you only pay for what
you use.
The charge covers the input (set up), matching and cash and securities settlement
where applicable. It is made to both the distributor and the fund manager.
Communications charges also apply. For a full list of the communications charges
involved, please see the Euroclear UK & Ireland Tariff document, available at
www.euroclear.co.uk > Services > Tariff
For more detailed information, a guideline to funds settlement pricing can be found
at www.euroclear.co.uk > Services > Funds settlement
No. of transactions / month Fee
<= 5,000 £0.80
5,001 – 10,000 £0.60
10,001 – 15,000 £0.40
15,001 – 20,000 £0.20
Each additional transaction £0.10
Euroclear UK & Ireland investment funds service

8 Euroclear – March 2011
A global funds processing solution for Europe
The Euroclear UK & Ireland investment funds service is another step towards
fulfi lling our ultimate vision of a pan-European order routing, asset servicing and
settlement solution for the funds industry. When completed, we will be able to
offer full STP between the Euroclear group CSDs, covering all aspects of the funds
life cycle.
To achieve this, Euroclear has launched an automated link between Fundsettle
International, Euroclear Bank’s platform for automated cross-border fund
processing, and the EMX Message System. Euroclear has also introduced a second
link from the EMX Message System to FundSettle International for cross-border
funds. This will provide users of the EMX Message System with expanded access
to the cross-border market.
An important component of this initiative will be to offer clients a choice of
message formats used to communicate transaction information. Clients will
have the choice of using FIX (the UK standard today) or ISO standards (a more
universal standard). This syntax-neutral solution will allow clients to automatically
route and settle fund transactions without needing to change their existing
communications infrastructure.
By developing further interoperability between the existing systems, the need for
new investment will be minimised and clients will be able to benefi t in the short
and medium term.
Importantly, clients will be able to pick and choose the services they want to use.
For example, a client could continue to use the EMX Message System for its order
routing but not make use of the settlement and asset servicing capabilities offered
by Euroclear UK & Ireland. In addition, clients will be able to access the funds of
one market or all of the markets covered by Euroclear.
“An unprecedented
opportunity to harmonise
unit trust settlement with

equity settlement.”
Judy Price,
COO at Rensburg Sheppards
Euroclear UK & Ireland investment funds service
Euroclear – March 2011 9
Further information
A wide range of documents can be found at www.euroclear.co.uk > Services >
Funds settlement, including:
• Euroclear UK & Ireland funds settlement white book
• Cash settlement of funds trades by means of a trade feed from EMXCo
• Defi nition of market practice for settlement of UK funds
• A guideline to funds settlement pricing
Euroclear UK & Ireland operates CREST, one of the largest and most technically
advanced settlement systems in the world. It offers real-time settlement for Irish,
UK, Jersey, Isle of Man, Guernsey and international securities. We process around
1.6 million transactions per day. Each day securities movements with a value of
£1.6 trillion are settled in the CREST system
We also operate the EMX Message Sytem, which provides an electronic
messaging solution for automating the purchase, sale, valuation, reconciliation and
re-registration of unitised funds. The EMX Message System is Europe’s leading
funds messaging platform and routed over 37 million messages in 2010. Use of the
EMX Message System for purchase, sale, valuation and reconciliation messages is
free to distributors.
Euroclear UK & Ireland investment funds service
10 Euroclear – March 2011
Contact us
To fi nd out more, please contact your Relationship Manager on
+44 (0)20 7849 0808.
The following names and numbers may also be useful:
Euroclear UK & Ireland investment funds service

Andrew Rudd
+44 (0)20 7849 0053

EMX Message System Client Relationship
+44 (0)1279 858 333
UK Client Contact Centre
+44 (0)8459 645 648
client_service_london@euroclear
Client Data Management
+44 (0)20 7849 0997

Training
Peter Caldwell
+44 (0)20 7849 0031

On Demand Trialling
+44 (0)8459 645 648 (option 5)

A complete list of contacts can be found at www.euroclear.co.uk > Contact
Euroclear UK & Ireland investment funds service
Euroclear – March 2011 11
Notes
Euroclear UK & Ireland investment funds service
12 Euroclear – March 2011
Notes

www.euroclear.com
www
.euroc
l

ear.com
MA0437
www.euroclear.com
© 2011
Euroclear UK & Ireland Limited is incorporated in England and Wales under registered number 2878738, with registered
address at 33 Cannon Street, London EC4M 5SB, United Kingdom – Tel: +44 (0)20 7849 0000 – www. euroclear.co.uk –
Euroclear UK & Ireland Limited is the operator of the CREST settlement system – Euroclear is the marketing name for the Euroclear
System, Euroclear plc, Euroclear SA/NV and their affi liates.

“Euroclear, owner of Fundsettle
International and the EMX Message
System, has been at the forefront
of the effort to automate and
standardise the European investment
funds processing landscape. By year
end 2009, Euroclear UK & Ireland
will provide the UK investment fund
industry with its fi rst automated
settlement solution to refl ect cash
and fund unit movements in notional
client accounts. In partnership with
some of the leading fund promoters,
the fi rm is providing cost and risk
containment incentives to allow the
fund business to grow unencumbered
by operational burdens.”
©2009 Funds Europe